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What Is the Keystone XL Oil Pipeline?

REUTERS/TransCanada Corporation/Handout

By Reuters

January 18, 2012

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TransCanada Corp's Keystone XL pipeline has been at the center of an emotional debate in the United States, pitting promoters of energy security and job creation against advocates of a green economy who fear the environmental risks of moving oil across the length of the country.

Here are the facts and figures of the proposal and the major issues surrounding it:

The ProjectProponent: TransCanada, its country's largest pipeline and power generation operator, is best known for running the most extensive natural gas pipeline network in Canada and much of the northern United States. Current market value is $30.5 billion. Company is led by Chief Executive Russ Girling.

Estimated Cost: $7 billion. When added to the initial Keystone pipeline, which started moving crude to southern Illinois and Cushing, Oklahoma, in 2010, the overall cost is $13 billion, making it one of the biggest infrastructure projects on the continent.

Capacity: 830,000 barrels per day. When combined with Keystone I the capacity would be 1.4 million bpd.

Scope: Keystone XL would move crude 1,661 miles to the Port Arthur, Texas, area from Hardisty, Alberta, a pipeline terminal that serves supply from the northern Alberta oil sands. In between, it would cross Saskatchewan, Montana, South Dakota and Nebraska. In the southern part of the state, it would be incorporated with the current Keystone line through Kansas and Oklahoma. From the storage hub of Cushing, Oklahoma, it would extend south to the refineries on the Gulf of Mexico and in the Houston area.

State of play: Keystone XL received Canadian approval in March 2010, but the U.S. State Department has yet to rule following a lengthened environmental process that has included draft and final impact statements, and public meetings. The department had said publicly it aimed to make its decision before year end, but the tone shifted in early November.

The State Department in November said it would pursue a new route to avoid a major underground water source in Nebraska - which had become a flashpoint of controversy - delaying the decision past the 2012 U.S. presidential election and into 2013.

Just days after the delay, TransCanada struck a deal with Nebraska lawmakers to examine a new route away from the Sandhills region in the state and the Ogallala aquifer. As much as 27 percent of U.S. irrigated land overlies the water source, which yields nearly a third of U.S. groundwater used for irrigation, according the U.S. Geological Survey. It also provides drinking water for 82 percent of residents within the aquifer boundary.

Republicans in Congress called the delay a political move and included language to expedite a decision in legislation extending a payroll tax cut. The Obama administration must decide whether to approve the project by mid-February.

A "special review" of the State Department's handling of the pipeline permitting is due out soon, officials have said.

Following Washington's postponement, the Canadian government redoubled efforts to build a pipeline to the Pacific Coast, where the crude could be shipped to Asia, saying it did not want to be so dependent on one customer.

The IssuesPro: TransCanada and supporters say the project would be key to improving U.S. energy security. These include the Canadian government, the oil industry, some U.S. Republican lawmakers and politicians of all stripes from energy-producing states, as well as unions such as the Teamsters.

TransCanada has said the project, which will result in the most advanced pipeline ever built, will create 20,000 jobs in the United States at a time of high unemployment.

Backers say it would reduce dependence on oil from unfriendly nations in the Middle East and from Venezuela, and would bolster supplies from a stable and reliable ally that has the world's third-largest crude deposit. It would also provide a large new source of oil for the Gulf Coast, where supplies from Mexico and Venezuela are dwindling.

Canada already ships more than 2 million bpd to the United States, representing 22 percent of imports, according to the U.S. Department of Energy. Keystone XL, if fully used, could displace up to 8 percent of supplies from other countries.

Canada and its oil industry say the line will improve returns for producers, which now sell much of their crude into the U.S. Midwest and Oklahoma, where a glut has depressed prices.

Con: Opponents include a broad range of environmental groups, such as the Natural Resources Defense Council and Friends of the Earth, celebrities, Canada's energy workers' union and many Democrats.

Some have feared the risks of oil spills in environmentally sensitive regions throughout the central United States.

Critics contend oil derived from the oil sands is more corrosive to pipeline walls, although there is no conclusive science on that. Recent spills in Michigan and Montana were due to ruptures of pipes carrying Canadian oil, albeit older ones. A U.S. safety regulator is studying the question and will issue a report by mid-2013.

Opponents also say the line will encourage more development of the Alberta tar sands, which they say is detrimental to the fight against global warming due to the high carbon intensity of the operations. They say Keystone XL will dash hopes for a move to renewable energy sources and a green economy.

Some analysts say the pipeline could boost U.S. pump prices by reducing the gasoline glut at Cushing, Oklahoma.

The PoliticsThe project has posed political risks for President Barack Obama as he seeks to hold on to the White House in 2012.

Approving the pipeline would upset environmentalists, part of his liberal political base, who are disappointed that he has not passed broad climate change legislation.

But blocking the project, as Obama did Wednesday, could allow the president's opponents to suggest he has not done all he can to tap new sources of fuel or create jobs. Obama, a Democrat, has advocated "green energy" while Republicans have pressed for more oil drilling.